Exam 4: Asection 4: Global Forces: How Is Canada Faring in the Global Village

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The level of formalization in an organization refers to the degree to which rules, regulations, procedures, and the like govern how work is performed. In other words, formalization reflects the degree to which jobs within the organization are standardized. A high level of formalization means highly standardized work-that is, clear rules regarding how the work should be performed. Highly standardized work, or work that is very much rule-directed, suggests that there is little individual discretion in how that work can be performed. Workers know what is expected of them and how, exactly, they should be performing their jobs. In addition, the greater the degree of formalization, the less reliance there is on individual discretion. Essentially, what we have witnessed in many organizations is a shift from high formalization and standardization of work practices to less formality. Given the need to adapt to the rapidly changing external environment, organizations have found they must be willing to scrap the old way of doing things in favour of methods that better accommodate the changing demands of their environment.

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A virtual organization is an organization that attempts to maximize its fluidity, flatness, and "integratedness" with the environment. Outsourcing, networking and shedding non-core functions are three ways organizations can become more 'virtual'. Typically, a keiretsu involves a large bank or financial institution, a large industrial organization, and a number of smaller firms, where the integrated network of relationships allows the large industrial organization to produce the product with financial assistance from the bank. The role of the smaller firms may be to supply parts to the manufacturer, conduct research, or perhaps distribute the final product. What we observe in virtual organizations are only those activities that are central-they are kept in-house, so to speak, and all other functions are outsourced to separate companies or individuals who are typically coordinated by a small head office. Or as in this case, each company is simply involved in some kind of network where each brings its own expertise to the collection of companies.

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This credit application system needs to move away from departments and be organized around process-in other words, designing the organization in a way that considers the actual jobs that need to be performed. This is in contrast to a blanket approach to organizational design that would simply advocate the creation of different departments that jobs will be organized in. Often the bureaucratic structure becomes preoccupied with administrative levels of hierarchy, rules, and regulations. What reengineering advocates is to move away from a preoccupation with organizing work based on tasks, jobs, departments, and administrative levels of hierarchy, and instead to focus on processes-the activities required to transform inputs into outputs. Consequently, "scrap" the traditional method organized around specialized, compartmentalized tasks and redesign the work around the process itself of completing a credit application. This did not require numerous specialists, but simply a few generalists. That is, one person could process an entire application without passing it on to others. This will decrease the application time, increase in the number of applications processed, and require fewer employees to do the job.